Saturday marks the turn of the Chinese new year and, according to the Chinese calendar, 2010 is “the year of the tiger.” Though Chinese celebrations to usher in the new year may go fairly unnoticed, changes in relations between Costa Rica and China will be monumental during the next 12 months.
For Costa Rica, 2010 may go down in Costa Rican history as “the year of China.” The latest handshake between the two countries took place Wednesday, when Costa Rica and China finalized negotiations on a free-trade agreement, which will initially eliminate tariffs on 58 percent of the products traded between the two countries. During the next 10 years, the agreement will eliminate tariffs on 90 percent of the goods traded.
Pending ratification by the Legislative Assembly, Costa Rica will be the first Central American country to forge a free-trade accord with China. The pact will be presented to the assembly for its approval in April.
“This is a very special day for us,” said Costa Rican Foreign Trade Minister Marco Vinicio Ruiz on Wednesday. “I am pleased to say that a few minutes ago we concluded the sixth round of negotiations between Costa Rica and the Republic of China. We have now satisfactorily concluded the free-trade agreement with the third biggest economy in the world. Without question, this is a milestone for Costa Rican commercial policy.”
Ruiz’s words were echoed by Yi Xioazhun, Chinese vice minister of trade.
“The negotiations were conducted very professionally, and both countries were able to protect their own interests while satisfying the interests of their trading partner,” said Xioazhun. “I think the signing of a free-trade agreement with Costa Rica is the best New Year’s gift we could receive.”
The pending free-trade agreement is the latest in a series of important developments between the two countries over the past two-and- a-half years, when they officially established diplomatic relations. In June of 2007, President Oscar Arias severed Costa Rica’s more than 60-year relationship with Taiwan and announced Costa Rica’s recognition of mainland China.
The ensuing Costa Rica-Chinese courtship has progressed at high speed and, with the approval of the free-trade deal in April probable, is showing no signs of slowing down.
A Stadium, an Oil Refinery, a Barrio
In October 2007, Arias took a weeklong trip to China. This was the first official visit to the Eastern Hemisphere giant by a Costa Rican president, and it was quite a productive week.
During his visit, the seeds for mutual cooperation between the two countries were planted. Arias returned to Costa Rica with a donation of $20 million in aid, the promise of a new national sports stadium, a $27-million “technical and economic cooperation” fund and an agreement signed by the China National Petroleum Corporation to explore possibilities for a several-billion-dollar expansion of Costa Rica’s National Oil Refinery (RECOPE).
The seeds planted during that visit have since blossomed with projects in Costa Rica.
Most noticeable is the $80-million soccer stadium being erected in La Sabana Park, west of San José. The stadium, a gift to Costa Rica from China, will be the largest in Central America, seating 35,000.
“Thanks to the overwhelming generosity of the Chinese people, our dream will be possible in a few months,” Arias said on the day construction began in March of last year.
“Today we place the first stone of a stadium that represents the passion of our people, a stadium that is the heart of our country, half of the lung of our city.”
The stadium, being constructed by 800 Chinese workers, will have an electronic retractable roof, shops, a track field, a giant television screen and a small museum. The stadium, more than 50 percent complete, is expected to host its first event one year from now, in February 2011.
In addition to the stadium, San José will inaugurate a “Chinatown” this year. In October of 2009, Arias stood alongside the mayor of the Chinese capital of Beijing as the two men laid the first brick of “Barrio Chino,” which is being constructed along Paseo de los Estudiantes, between Avenidas 2 and 14. During the next four months, the 8,300-meter route is expected to experience an architectural makeover and include a host of “symbols of Chinese culture”.
“There already is some Chinese influence here,” said Grace Escalante, who manages a soda near Paseo de los Estudiantes and is married to a Chinese restaurant owner. “But over the next couple of years, I bet this entire street will be China, China, China. I think the number of Chinese people in San José is going to grow a ton over the next few years.”
As for the RECOPE expansion, engineers from China and the Costa Rican refinery are in the process of defining the work to be done. The expansion work is expected to begin in 2011. The goal is to triple the refinery’s capacity by 2015.
Trading With World’s Top Exporter
In 2006, Chile became the first Latin American country to establish a free-trade agreement China, the world’s most populous country (1.3 billion people). Since then, trade between the two countries has skyrocketed.
“China has surpassed the U.S. as the first trading partner with Chile,” said Jaime Bazan, general manager of the American Chamber of Commerce in Chile. “It might not be entirely because of the free-trade agreement because it has a lot to do with the current price of copper, which is 80 percent of our exports to China. The price of copper has been steady, so the export of copper from Chile to China has increased quite dramatically.”
In 2009, China surpassed Germany as the world’s leading exporter of goods. According to the Costa Rican Foreign Trade Promotion Office (PROCOMER), China is currently the second largest trading partner with Costa Rica, behind the U.S.
Since 1998, exports to China from Costa Rica have risen from $78 million to as high as $1.4 billion in 2007. Imports from China have experienced similar growth, jumping from $89.2 million in 1998 to $994 million in 2008.
Ninety-five percent of exports to China from Costa Rica in 2009 were either integrated circuits or computer parts. Ruiz commented on this Wednesday, saying he expects the level of technology exports to China, particularly from the software company Intel, to continue to surge.
But increased exports are only the sunny side of the free-trade agreement. Many industrial and agricultural sectors oppose the accord. Hours after the free-trade agreement with China was announced, Juan María González, president of the Chamber of Industries, aired his views.
In a statement released to the press, González explained that China is considered an “untrustworthy” commercial society that aims to create unbalanced negotiations.
González also said the format of the negotiations should be limited, as he considers the scope of products included too broad.
“We request that special clauses be taken into account for the protection of national industries … (We believe) this agreement will negatively affect the future of investment in the national industrial sector.”
Mario Montero, general manager of the Food Industry Chamber (CACIA), also expressed concern about Chinese competition in the local market. Montero said he believes China’s undefined labor laws and weak sanitary practices should be aligned with Costa Rican standards before the free trade agreement is approved.
Although Costa Rican industries are hoping for alterations to the agreement, Ruiz said that, similar to the Central American Free-Trade Agreement with the U.S. (CAFTA), protest of the accord is inevitable.
“It’s expected,” said Ruiz. “Free-trade agreements don’t please everyone. Many companies and industries are worried that they will be affected by the agreement, just as they were with CAFTA. However, in the end, the free-trade agreement with China will provide extraordinary benefits to Costa Rica.”